Charles Schwab Intelligent Portfolio Reviews

Charles Schwab has long been an industry leader in the robo-adviser space.Those who follow Charles Schwab Intelligent Portfolio reviews know they were the first major online company tointroduce the concept, they continue to stay ahead of their competition with unique online offerings and their fee-free account management policy.

The Schwab Intelligent Portfolios manage over $10 billion in assets and obtain earnings from the funds traded through the exchange in its managed portfolios.The revenue stream includes both third-party funds and their own funds, and the expense ratios are paid through the fund investors.

Investors who can meet the $5,000 account minimum and aren’t averse to a portfolio with a relatively high cash allocation are a good fit for this robo-advisor choice.

In this Charles Schwab Intelligent Portfolio review, we’ll examine the product to help you better understand how the product works, its features, the best type of investor for the product, andpotential drawbacks, to give you the tools you need to decide if this is the best investment choice for you.

At A Glance Summary of Charles Schwab Intelligent Portfolio

Here we’ll highlight the basics of what you need to know about this online robo-advisor investment option.

Account Basics

Investors need a minimum of $5,000 to open an account with Charles Schwab.There are no management fees, or annual account, transfer, or closing fees. Accounts supported include:

  • IRAs- Traditional, Roth, and Rollover
  • Non-retirement accounts- Individual and Joint
  • Custodial accounts and trusts
  • Automatic rebalancing on all accounts
  • Free tax-strategy analysis for investors with $50,000 and above
  • Customer support over phone or online chat available 24/7

Investment Information

The investment scope includes:

53 exchange-traded funds (ETFs) that cover 20 different asset classes Options include stocks, bonds, emerging markets, real estate investment trusts and commodities.

How it Works

Charles Schwab touts state-of-the-art asset allocation based on current asset allocation algorithms that also take into account your appetite for risk.Users can manage behavior considerations, including whether avoiding losses is more important that acquiring gains.This allows Charles Schwab to manage funds to your preference for loss aversion.

The asset allocation goes beyond the traditional stocks, bonds, and cash blend.Non-traditional asset classes that include hot commodities like gold are part of the mix, and stocks and bonds are managed in a variety of sub-asset classes.Investors can view stocks in their portfolio grouped by large and small, domestic and international, and emerging versus developed markets.Bond allocations could include high-yield bonds, corporate bonds, agencies, and Treasuries.

Users will primarily fall into one of Charles Schwab’s three different asset allocation philosophies:

  • Traditional diversification:Someone who chooses their asset classes based on the desire to maximize the expected return for a given level of risk.
  • Risk budgeting:An investor whose goal isto diversify the sources of risk across multiple asset classes.
  • Goal-driven:A user planning for a more specific goal, like achieving an absolute return.

For more information on the specifics of asset acclamation, review Charles Schwab’s White Paper.

Features

Several key features that make Charles Schwab Intelligent Portfolio an attractive option for investors.The key areas their product shines are as follows.

Free Account Management

Unlike most robo-advisors who charge both a management fee and for investment expenses, Schwab investors payno management fees, commissions to brokers, or account fees on their Intelligent Portfolio accounts.

However, users will pay expense ratios based on the investments you choose, and many ofthose are Schwab funds.That’s how they pay for the service.That said, even with those expenses ratios for the most aggressive risk portfolios, the service can still be less costly with other online advisors.

According to Schwab, their weighted average expenses in their initial portfolio allocations that they recommend to individual advisors are:

  • Conservative portfolio: 0.07%.
  • Moderate-risk portfolio: 0.16%.
  • Aggressive portfolio: 0.21%.

Customizable

Personalized investing is important, and Schwab takes it seriously.Customers answer questions online to develop a customized profile based on goals, time constraints, and risk profile.Investors can accept these results, or make additional changes to the allocations bychoosing upto three ETF’s to remove and replace with an alternative investment.

Accurately Track Goals

Whether you have short or long-term financial goals in mind, keeping your finger on the pulse ofyour investments is one key to success.The Goal Tracker feature in Schwab Intelligent Portfolio allows you to customize a savings or income goal and receive daily feedback on how you’re tracking.

The tool uses simulations based on the sophisticated Monte Carlo design that looks at your returns in multiple random scenarios and calculates if you are on target, at risk, or off target for reaching your goals.The feature will then recommend adjustments that improve your likelihood of achieving your target if you’re off track.

This tool offers valuable insight for investors, especially if you’re nearing retirement and are about to start drawing income from your investments.The algorithm is an active way of monitoring how your withdrawals affect the future of your income stream and allow you to make course corrections to ensure you don’t run out of money in retirement.

Potential Drawbacks

Although the Schwab product has many upsides, it also has two potential drawbacks depending on your investment strategy.The first is that their plan includes a comparatively large allocation of portfolios to cash.You will have a minimum of6%upto a maximum of 29.4% of total portfolio holdings that are managed in a deposit account and earn interested based on the $10,000 level of average money market rates according to RateWatch.

This allocation can create a cash drag, producing low single-digit returns, that while safe, aren’t being actively managed in a fund with the potential for large gains.

The second potential drawback for smaller investors is the high limit for access to a tax-loss advisor. Users need to have a minimum of $50,000 invested in their taxable accounts to use the service.

Who Would Benefit

Although Intelligent Portfolios have a few drawbacks, this isan excellent robo-advisor choice for investors who want to put their money with a well-known and established company.

Someone with a minimum of $5,000 who doesn’t want to pay any advisory and account service fees or commissions to brokers are a good fit for this product.Additionally, the tools make iteasy for beginner investors or anyone who wants to choose from a wide range of exchange traded funds and asset classes to get into the investment game.IRA investors or those nearing retirement age are also good candidates because of the goal tracking features.

Final Thoughts

When it comes to online robo-advisors, Charles Schwab Intelligent Portfolios reviews fall closely in line with several others in the marketplace.The main advantage to this advisor is the size ofthe company and the experience they have in developing divested portfolios for clients with different goals and risk attitudes.

What makes this product stand outis the range of investments available, the ability to customize beyond their initial recommendations, and the free account management.This is a good fit for clients who are comfortable with high cash allocations, and who want a trusted name managing their money.

About the Author HarryC

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